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XAU/USD is trading above $2,600 per ounce as the year draws to a close, though upward momentum remains limited. Risk-off sentiment spurred by the year-end market slowdown has provided some support for gold prices.
Trading activity has been subdued in recent days as investors prepare for the New Year’s holiday, with many exchanges closed on Wednesday. XAU/USD experienced a minor rebound on Tuesday, recovering from a brief dip below $2,600. However, overall market activity has been characterized by narrow trading ranges, reflecting a lack of significant drivers for major price movements.
Gold prices enjoyed a remarkable 2024, surging over 40% to record highs above $2,790 in October. This rally was fueled by a strong AI-driven surge in technology stocks, which lifted equity markets to new heights. While prices have pulled back from their peak, gold remains significantly higher than its year-end 2023 levels.
The inverse relationship between gold and the US dollar remains a key factor influencing price movements. As the US dollar weakened earlier this year, gold prices surged. A potential reversal in the US dollar’s downtrend could exert downward pressure on gold prices. Additionally, the policies of the incoming US administration could significantly impact market sentiment and the strength of the US dollar, consequently influencing gold prices.
Technical Factors
While gold prices are holding above $2,600, upward momentum remains constrained below the 50-day Exponential Moving Average (EMA), currently around $2,635. Support lies at the recent swing low near $2,560, while a retest of December’s peak near $2,720 appears unlikely in the near term.
The 200-day EMA near $2,485 provides a key support level on further downside. Traders will be closely watching for a sustained move above $2,635 to signal a potential resumption of the upward trend and a challenge of the $2,800 level.
